Two independent publishers are finding opportunities by exploiting areas that the major publishing companies are neglecting. In fact, those holes were big enough to inspire Larry Mestel and his partners to form Primary Wave Music Publishing in January 2006, he reported during a case-study panel at the Billboard Music & Money Symposium, held in New York today.

"We believe that the label business is in decline and the majors had to many songs to exploit" them properly, he said. With a game plan in hand, Mestel and his partners went looking for financing, and at the same time began negotiating acquisitions of artists publishing catalogs.

While the company thought it would close quickly in raising capital, that process proved otherwise. New York investment bank Allen & Co. stepped in and after two days of meetings, the Primary Wave partners had four or five terms sheets, but not one private equity firm that could close quickly. Fortunately, Plainfield Asset Management stepped up to the plate, and did a deal in a couple of days.

It then embarked on a series of acquisitions including the Kurt Cobain catalog, and during the next 22 months, the company was refinanced three times.

In a departure from how traditional publishing companies are constructed, Primary Wave went ahead and "rather than building a back-office, we created a marketing team," hiring people that were familiar with the video game, television and advertising industries in order to exploit the newly acquired songs and catalog.

Along the way, other artist catalogs it acquired include Hall & Oates, Lamont Dozier and Maurice White. In addition, the company initially held off from doing publishing administrative deals, but that changed a few months ago, when it agreed to admin Gram Parker and Greg Allman.

"Very few artist of iconic stature have become available that we haven't seen," said Mestel, who is partner/CEO for Primary Wave.

In terms of finding opportunities for the acquired songs and catalogs, the company just finished a deal with Converse sneakers to use Cobain lyrics in a commercial. The company is also creating a superhero cartoon where it will use Hall & Oates songs. Additionally, it has had success in placing songs in commercials for Coke and Mastercards, among other strong brands.

On the other hand, Bug Music was an old-time publishing company that was acquired and revitalized by Crossroads Entertainment, which acquired the publisher in the last 18 months.

Bug Music's upside was that it was a full service provider, it had a significant infrastructure, it had 125,000 copyrights, and it was also involved in developing writers, reported Bug Music CEO John Rudolph.

In order to differentiate itself when looking for catalog acquisition, Rudolph said he decided to forgo those assets that generate $1 million - $10 million in NPS (net publishers share), and stick to those catalog in the $50,000 to $1 million NPS range, because they are too small to bring in the private equity funds or the institutional lenders. Assets in the mid-sized market have too many players chasing them, thus usually trade hands at higher multiples.

On the other hand, Bug likes catalogs with more than $10 million in NPS because the multiples at that end tend to drop.